Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/184742
Authors: 
Paetzold, Jörg
Year of Publication: 
2017
Series/Report no.: 
Working Papers in Economics 2017-01
Abstract: 
This paper contributes to recent literature emphasizing the importance to identify the different channels along which taxable income responses occur. Using bunching techniques and exploiting a large first kink point where marginal tax rates increase by as much as 38 percentage points, we recover modest gross wage earnings responses of Austrian employees. Next, we show that when accounting for deduction behavior, the additional mass of wage earners at the kink increases by around 50%. We find direct evidence for wage earners targeting the kink with their deduction claiming. Finally, we use a novel estimation strategy to show evidence that the probability of claiming a deduction depends on its (net-of-tax) cash value, and we provide a new estimate for the deduction elasticity. In sum, our results suggest that distinguishing between earnings and deduction responses matters even for taxpayers with only limited possibilities to shelter taxable income.
Subjects: 
Bunching
elasticity of wage earnings and deductions
tax expenditures
deduction behavior
administrative data
JEL: 
H21
H24
J22
Document Type: 
Working Paper
Social Media Mentions:

Files in This Item:
File
Size
907.28 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.